What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 168 added, 144 removed, 536 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Current assets:

Cash and cash equivalents $ 82,246 $ 83,642

Accounts receivable (net of allowances of $ 969 and $ 1,158 at March 29, 2024 and December 29, 2023, respectively)

Accounts receivable (net of allowances of $ 940 and $ 1,158 , respectively)

157,949 171,060

23 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of March 29, 2024 and December 29, 2023

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of June 28, 2024 and December 29, 2023

Common stock, $ 0.001 par value — 90,000 authorized;

42,506 shares issued and 41,616 outstanding as of March 29, 2024;

42,572 shares issued and 41,682 outstanding as of June 28, 2024;

42,844 shares issued and 41,954 outstanding as of December 29, 2023

1 unchanged sentence

Treasury stock, at cost;

890 common shares as of March 29, 2024 and December 29, 2023

890 common shares as of June 28, 2024 and December 29, 2023

( 13,754 ) ( 13,754 )

5 unchanged sentences

FOX FACTORY HOLDING CORP.

Condensed Consolidated Statements of (Loss) Income

Condensed Consolidated Statements of Income

(in thousands, except per share data)

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net sales $ 348,491 $ 400,715 $ 681,963 $ 800,566

9 unchanged sentences

Interest expense 13,865 4,418 27,194 7,939

Other expense, net 309 24

(Loss) Income before income taxes ( 4,763 ) 51,145

Other (income) expense, net ( 311 ) 536 ( 2 ) 560

Income before income taxes 5,036 47,830 273 98,975

(Benefit) provision for income taxes ( 371 ) 8,095 ( 1,638 ) 17,473

Net (loss) income $ ( 3,496 ) $ 41,767

(Loss) Earnings per share:

Net income $ 5,407 $ 39,735 $ 1,911 $ 81,502

Earnings per share:

Basic $ 0.13 $ 0.94 $ 0.05 $ 1.93

5 unchanged sentences

FOX FACTORY HOLDING CORP.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

For the three months ended

March 29, 2024 March 31, 2023

Net (loss) income $ ( 3,496 ) $ 41,767

Other comprehensive loss

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net income $ 5,407 $ 39,735 $ 1,911 $ 81,502

Other comprehensive income (loss)

Interest rate swap

Change in net unrealized gain, net of tax effects of $( 43 ) and $( 571 ), respectively

Change in net unrealized gains, net of tax effects of $( 277 ) and $( 320 ) for the three and six months ended June 28, 2024, respectively, and $ 210 and $( 361 ) for the three and six months ended June 30, 2023, respectively

339 2,188 1,798 188

reclassification of net gain on interest rate swap to net earnings ( 1,785 ) ( 1,063 )

reclassification of net gains on interest rate swap to net earnings ( 1,775 ) ( 1,063 ) ( 3,560 ) ( 2,126 )

Net change, net of tax effects ( 1,436 ) 1,125 ( 1,762 ) ( 1,938 )

Foreign currency translation adjustments ( 999 ) ( 726 ) ( 3,881 ) ( 115 )

Other comprehensive loss ( 3,208 ) ( 2,452 )

Comprehensive (loss) income $ ( 6,704 ) $ 39,315

Other comprehensive (loss) income ( 2,435 ) 399 ( 5,643 ) ( 2,053 )

Comprehensive income (loss) $ 2,972 $ 40,134 $ ( 3,732 ) $ 79,449

The accompanying notes are an integral part of these condensed consolidated financial statements.

10 unchanged sentences

Balance - March 31, 2023 43,193 $ 42 890 $ ( 13,754 ) $ 359,785 $ 12,330 $ 805,844 $ 1,164,247

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 51 — — — ( 3,063 ) — — ( 3,063 )

Stock-based compensation expense — — — — 4,483 — — 4,483

Other comprehensive income — — — — — 399 — 399

Net income — — — — — — 39,735 39,735

Balance - June 30, 2023 43,244 $ 42 890 $ ( 13,754 ) $ 361,205 $ 12,729 $ 845,579 $ 1,205,801

Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income Retained earnings Total stockholders’ equity

7 unchanged sentences

Balance - March 29, 2024 42,506 $ 42 890 $ ( 13,754 ) $ 334,860 $ 5,833 $ 865,508 $ 1,192,489

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 67 — — — ( 1,229 ) — — ( 1,229 )

Purchase and retirement of common stock — — — — — — ( 52 ) ( 52 )

Stock-based compensation expense — — — — 2,203 — — 2,203

Other comprehensive loss — — — — — ( 2,435 ) — ( 2,435 )

Net income — — — — — — 5,407 5,407

Balance - June 28, 2024 42,573 $ 42 890 $ ( 13,754 ) $ 335,834 $ 3,398 $ 870,863 $ 1,196,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the three months ended

March 29, 2024 March 31, 2023

For the six months ended

June 28, 2024 June 30, 2023

OPERATING ACTIVITIES:

Net (loss) income $ ( 3,496 ) $ 41,767

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Net income $ 1,911 $ 81,502

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 40,854 28,712

1 unchanged sentence

Stock-based compensation 6,109 10,184

Amortization of acquired inventory step-up 4,485 8,895

Amortization of loan fees 1,540 453

Amortization of deferred gains on prior swap settlements ( 2,126 ) ( 2,126 )

Amortization of inventory fair value step-up 4,485 3,064

Loss on disposal of property and equipment ( 27 ) 408

16 unchanged sentences

Payments on revolver ( 295,000 ) ( 85,000 )

Proceeds from issuance of debt 200,000 —

Repayment of term debt ( 7,143 ) —

10 unchanged sentences

(in thousands)

For the three months ended

For the six months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

March 29, 2024 March 31, 2023

Cash (received) paid during the period for:

Income tax (refund) payment $ ( 586 ) $ 13,460

Interest, net of capitalized interest 14,790 5,145

June 28, 2024 June 30, 2023

Cash paid during the period for:

Income tax payment $ 21,548 $ 34,241

Interest $ 29,081 $ 9,661

Amounts included in the measurement of lease liabilities $ 8,953 $ 6,307

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies - Fox Factory Holding Corp.

16 unchanged sentences

The 12-month periods ended January 3, 2025 and December 29, 2023, will include or have included 53 and 52 weeks, respectively.

The three-month periods ended March 29, 2024 and March 31, 2023 each included 13 weeks.

The three and six-month periods ended June 28, 2024 and June 30, 2023 each included 13 weeks and 26 weeks, respectively.

Principles of Consolidation - These condensed consolidated financial statements include the Company and its subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Summary of Significant Accounting Policies - There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024 that have had a material impact on our condensed consolidated financial statements and related notes.

Summary of Significant Accounting Policies - There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024 that had a material impact on our condensed consolidated financial statements and related notes.

Revenue Recognition - Revenues are generated from the sale of performance-defining products and systems to customers worldwide.

9 unchanged sentences

For other chassis, the Company entered into floorplan financing agreements, in which the Company pays interest expense based on the duration of time the chassis stay on the Company's premises.

Revenues generated from custom upfit packages from Outside Van subsidiary generally include the vehicle chassis, of which the Company has the risks and rewards of ownership and are recognized over-time as work is performed based on actual costs incurred.

Revenues generated from custom upfit packages from the Outside Van subsidiary generally include the vehicle chassis, of which the Company has the risks and rewards of ownership and are recognized over-time as work is performed based on actual costs incurred.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

We elected as a practical expedient to not capitalize the incremental costs to obtain contracts with customers since the amortization period would have been one year or less.

1 unchanged sentence

Segments - The Company determined that as of the end of the first quarter of fiscal year 2024, due to the manner in which we began to operate the business to further drive long term value to our shareholders and customers, we have three operating and reportable segments.

The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The chief operating decision maker for the Company is the Chief Executive Officer.

The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The CODM for the Company is the Chief Executive Officer.

Starting in March 2024, the Chief Executive Officer reviews additional financial information by operating and reportable segment for purposes of allocating resources and evaluating financial performance.

2 unchanged sentences

therefore, actual results could differ from management’s estimates.

Reclassifications - We reclassified certain prior period amounts within our condensed consolidated balance sheets, condensed consolidated statements of other comprehensive income, condensed consolidated statements of cash flows, and Note 2 - Revenues to conform to our current period presentation.

Reclassifications - We reclassified certain prior period amounts within our condensed consolidated balance sheets, condensed consolidated statements of other comprehensive income, and condensed consolidated statements of cash flows.

The reclassifications did not have any impact on net income.

5 unchanged sentences

The recast did not have any impact on net income.

Certain Significant Risks and Uncertainties - As of March 29, 2024, the Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, customer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

Certain Significant Risks and Uncertainties - As of June 28, 2024, the Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, customer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

International geopolitical conflicts, including continuing tensions between Taiwan and China, the Russian invasion of Ukraine, and the Israel-Palestine conflict on the global economy, energy supplies and raw materials may prove to negatively impact the Company’s business and operations.

3 unchanged sentences

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The carrying amounts of the Company’s financial instruments, including cash, receivables, accounts payable, accrued liabilities and revolver approximate their fair values due to their short-term nature.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

The carrying amounts of the Company’s financial instruments, including cash, receivables, accounts payable, accrued liabilities, and current portion of long-term debt approximate their fair values due to their short-term nature.

The carrying amounts of the Company’s revolver and long-term debt, excluding current portion, approximate their fair values because the interest rates vary with the market.

Non-GAAP Financial Measures - Total adjusted EBITDA presents the sum of the results of our three operating segments and unallocated corporate expenses on a consolidated basis.

22 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Recent Accounting Pronouncements

9 unchanged sentences

Improvements to Reportable Segment Disclosures.

The amendments in ASU 2023-07 require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM.

The amendments in ASU 2023-07 require disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM.

The amendments in this update also expand the interim segment disclosure requirements.

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

In the second quarter of fiscal year 2023, the Company realigned its Powered Vehicles Group into the Powered Vehicles Group and the Aftermarket Applications Group to be more aligned with the Company’s end customers and drive additional focus on product development.

The new Powered Vehicles Group is comprised of sales to original equipment off-road and power sports manufacturers and aftermarket businesses that sell shocks directly to dealers and distributors.

The Aftermarket Applications Group is comprised of aftermarket businesses that offer custom vehicle shock, tuning, suspension, lift kit, upfitting, and wheel and tire solutions for automotive and power sports enthusiasts.

All prior-period amounts have been recast to conform with the current period presentation.

The following table summarizes total net sales by product group:

For the three months ended

March 29, 2024 March 31, 2023

(in thousands)

The following table summarizes total net sales by segment:

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Powered Vehicles Group $ 117,795 $ 140,196 $ 235,908 $ 282,443

3 unchanged sentences

The following table summarizes total net sales by sales channel:

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

OEM $ 151,299 $ 197,257 $ 289,108 $ 414,918

4 unchanged sentences

The following table summarizes total net sales generated by geographic location of the customer:

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

North America $ 278,153 $ 303,999 $ 562,815 $ 595,909

3 unchanged sentences

Total net sales $ 348,491 $ 400,715 $ 681,963 $ 800,566

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

Inventory consisted of the following:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Raw materials $ 225,899 $ 217,888

2 unchanged sentences

Total inventory $ 380,408 $ 371,841

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands)

Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Prepaid chassis deposits $ 133,740 $ 108,866

4 unchanged sentences

Property, plant and equipment, net consisted of the following:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Machinery and manufacturing equipment $ 157,382 $ 149,502

9 unchanged sentences

The Company’s long-lived assets by geographic location are as follows:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

United States $ 199,425 $ 198,033

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Accrued Expenses

Accrued expenses consisted of the following:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Payroll and related expenses $ 24,143 $ 17,988

7 unchanged sentences

(i) in the case of OEM sales, the date the bike or powered vehicle is purchased from an authorized OEM where the product is incorporated as original equipment on the purchased bike or powered vehicle;

(ii) in the case of aftermarket sales, the date the product is originally purchased from an authorized dealer;

(ii) in the case of aftermarket/non-OEM sales, the date the product is originally purchased from an authorized dealer;

or (iii) in the case of upfitting sales, the date of the retail sale to an end customer.

Activity related to warranties is as follows:

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Beginning warranty liability $ 19,327 $ 18,224 $ 20,001 $ 17,071

15 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.

2 unchanged sentences

Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50 %, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00 %, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00 % to 1.00 %.

At March 29, 2024, the one-month SOFR and three-month SOFR rates were 5.32 % and 5.35 %, respectively.

At March 29, 2024, our weighted-average interest rate on outstanding borrowing was 6.93 %.

On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the “Amendment”) amending the 2022 Credit Facility.

1 unchanged sentence

The Incremental Term A Loan was fully funded on November 14, 2023 and used to fund a portion of the consideration owed under the Marucci acquisition.

The Delayed Draw Term Loan is available to the Company from and including December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated.

The Delayed Draw Term Loan was available to the Company from and including December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated.

Each Incremental Term Loan is subject to quarterly amortization payments of principal at a rate of 5.00 % per annum.

3 unchanged sentences

Loan fees allocated to the Term A Loan are amortized using the interest method over the term of the Credit Facility.

Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn.

Upon the drawing of the Delayed Draw Term Loan, the fees will be reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt was drawn.

On May 13, 2024, the Company borrowed the full amount of $ 200,000 of the Delayed Draw Term Loan.

The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

The Company recently secured an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment.

At June 28, 2024, the one-month SOFR and three-month SOFR rates were 5.34 % and 5.35 %, respectively.

At June 28, 2024, our weighted-average interest rate on outstanding borrowing was 7.07 %.

The 2022 Credit Facility is secured by substantially all of the Company’s assets, restricts the Company’s ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of March 29, 2024.

The Company was in compliance with the covenants as of June 28, 2024.

The following table summarizes the revolver under the 2022 Credit Facility:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Amount outstanding $ 194,000 $ 370,000

Standby letters of credit 167 —

Available borrowing capacity 455,833 280,000

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

As of March 29, 2024, future principal payments for long-term debt, including the current portion, as summarized as follows:

For fiscal year March 29, 2024

(in thousands)

As of June 28, 2024, future principal payments for term loan debt, including the current portion, as summarized as follows:

For fiscal year June 28, 2024

2024 (remaining 6 months) $ 12,143

4 unchanged sentences

Long-term debt less current portion $ 539,833

On June 11, 2021, the Company entered into a swap agreement (the “2021 Swap Agreement”) to obtain a more favorable interest rate and to manage interest rate risk exposure.

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the “2022 Swap Agreement”).

On April 5, 2022, the Company entered into a new interest rate swap agreement (the “2022 Swap Agreement”).

Through the 2022 Swap Agreement, the Company hedges the variability of cash flows in interest payments associated with $ 100,000 of its variable rate debt.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Commitments and Contingencies

7 unchanged sentences

The Company denies all allegations of wrongdoing, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself.

The defendants have not yet had the opportunity to respond to the complaint, as plaintiff is currently seeking, under applicable law, the court’s appointment of him as lead plaintiff and appointment of his counsel as lead counsel.

Bailment Pool Arrangements - The Company has relationships with several OEM partners, including General Motors (“GM”), Ford Motor Company (“Ford”), and Chrysler to obtain truck chassis.

For Chrysler chassis, the Company pays a cash deposit upon transfer of the chassis to the Company’s premises, and records the chassis within prepaids and other current assets on the condensed consolidated balance sheets until the chassis is transferred to the dealer customer’s floor plan, at which time the cash deposit is returned to the Company.

The Court has entered an order requiring plaintiff to file an amended complaint by August 16, 2024, and setting a briefing schedule for anticipated motion to dismiss the amended complaint.

Bailment Pool Arrangements - The Company has relationships with several OEM partners, including General Motors (“GM”), Ford Motor Company (“Ford”), and Stellantis to obtain truck chassis.

For Stellantis chassis, the Company pays a cash deposit upon transfer of the chassis to the Company’s premises, and records the chassis within prepaids and other current assets on the condensed consolidated balance sheets until the chassis is transferred to the dealer customer’s floor plan, at which time the cash deposit is returned to the Company.

For GM and Ford, the Company has entered into floor plan financing agreements with the OEM.

3 unchanged sentences

Interest payments made to manufacturer-affiliated finance companies are classified as operating activities in the condensed consolidated statements of cash flows.

At March 29, 2024 and December 29, 2023, the Company had utilized $ 18,371 and $ 9,036 , respectively, out of a maximum of $ 49,400 of Ford allocation of chassis, and $ 9,591 and $ 11,362 , respectively, out of a maximum of $ 100,000 GM allocation of chassis.

The Company incurred $ 214 and $ 450 of interest expense related to chassis on hand during the three months ended March 29, 2024 and December 29, 2023, respectively.

At June 28, 2024 and December 29, 2023, the Company utilized $ 50,028 and $ 9,036 , out of a maximum of $ 51,100 and $ 49,400 of Ford allocation of chassis, respectively, and $ 4,238 and $ 11,362 , respectively, out of a maximum of $ 100,000 GM allocation of chassis.

The Company incurred interest expense related to chassis on hand of $ 201 and $ 450 during the three month ended June 28, 2024 and December 29, 2023, respectively, and $ 414 and $ 1,190 during the six months ended June 28, 2024 and December 29, 2023, respectively.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Derivatives and Hedging

3 unchanged sentences

Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments based on the SOFR over the lives of the agreements without an exchange of the underlying principal amounts.

As of March 29, 2024 and December 29, 2023, the Company had the following interest rate swap contracts:

March 29, 2024 December 29, 2023

As of June 28, 2024 and December 29, 2023, the Company had the following interest rate swap contracts:

June 28, 2024 December 29, 2023

Effective Date Termination Date Notional Amount Unrealized Gain in AOCI Unrealized Gain in AOCI

5 unchanged sentences

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the “2022 Swap Agreement”) with a notional amount of $ 100,000 .

The terminated 2020 and 2021 Swap Agreements resulted in unrealized gains of $ 324 and $ 12,270 , respectively, at the termination dates that will continue to be accounted for in accumulated other comprehensive income and amortized into earnings over the term of the associated debt instrument.

The terminated 2020 and 2021 Swap Agreements resulted in unrealized gains of $ 324 and $ 12,270 , respectively, at the termination dates that will continue to be accounted for in accumulated other comprehensive income, or AOCI, and amortized into earnings over the term of the associated debt instrument.

The 2022 Swap Agreement has a maturity date of April 5, 2027 and is indexed to a three-month Term SOFR (as defined in the 2022 Swap Agreement).

3 unchanged sentences

As required under ASC 815, the interest rate swap contracts’ effectiveness will be assessed on a quarterly basis using a quantitative regression analysis.

The unrealized gains and losses, net of tax, deferred to accumulated other comprehensive income resulting from the derivative instruments designated as cash flow hedges for the three months ended March 29, 2024 and March 31, 2023 were a gain of $ 1,459 and a loss of $ 2,000 , respectively.

The reclassifications of gains from accumulated other comprehensive income into earnings related to the derivative instruments designated as cash flow hedges during the three months ended March 29, 2024 and March 31, 2023 were $ 1,785 and $ 1,063 , respectively.

The unrealized gains net of tax, deferred to accumulated other comprehensive income resulting from the derivative instruments designated as cash flow hedges for the three and six months ended June 28, 2024 were gains of $ 339 and $ 1,798 , respectively;

and for the three and six months ended June 30, 2023 were gains of $ 2,188 and $ 188 , respectively.

The reclassifications of gains from accumulated other comprehensive income into earnings related to the derivative instruments designated as cash flow hedges during the three and six months ended June 28, 2024 were $ 1,775 and $ 3,560 , respectively;

and during the three and six months ended June 30, 2023 were $ 1,063 and $ 2,126 , respectively.

Over the next 12 months, the Company expects to recognize $ 5,911 of the $ 7,069 of unrealized gains included in accumulated other comprehensive income related to the interest rate swap contracts.

4 unchanged sentences

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the following periods:

March 29, 2024 December 29, 2023

June 28, 2024 December 29, 2023

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

1 unchanged sentence

Total assets measured at fair value $ — $ 4,078 $ — $ 4,078 $ — $ 3,394 $ — $ 3,394

Incremental Term A Loan $ — $ 370,430 $ — $ 370,430 $ — $ 373,528 $ — $ 373,528

Incremental Term Loans $ — $ 564,119 $ — $ 564,119 $ — $ 373,528 $ — $ 373,528

Revolver — 194,000 — 194,000 — 370,000 — 370,000

Total liabilities measured at fair value $ — $ 758,119 $ — $ 758,119 $ — $ 743,528 $ — $ 743,528

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three month periods ended March 29, 2024.

As of March 29, 2024, the carrying amount of the principal under the Company’s 2022 Credit Facility - Incremental Term A Loan approximated fair value because it had a variable interest rate that reflected market changes in interest rates and changes in the Company’s net leverage ratio.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and six month periods ended June 28, 2024.

As of June 28, 2024, the carrying amount of the principal under the Company’s 2022 Credit Facility - Incremental Term Loans and Revolver approximated fair value because they had variable interest rates that reflected market changes in interest rates and changes in the Company’s net leverage ratio.

On June 11, 2021, the Company entered into the 2021 Swap Agreement to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt.

2 unchanged sentences

In accordance with ASC 815, an interest rate swap contract is recognized as an asset or liability on the condensed consolidated balance sheets and is measured at fair value.

The fair value was calculated utilizing Level 2 inputs.

The fair value was estimated based on expected cash flows over the life of the Swap.

These expected cash flows were determined using a pricing model that incorporated reasonable assumptions and available market data .

Stockholders’ Equity

4 unchanged sentences

The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company’s discretion.

During the three months ended March 29, 2024, the Company repurchased approximately 378 shares for $ 25,000 , at an average price of $ 66.03 .

There were no repurchases of common stock during the three months ended June 28, 2024.

During the six months ended June 28, 2024, the Company repurchased approximately 378 shares for $ 25,000 , at an average price of $ 66.03 .

All repurchased shares were immediately retired.

2 unchanged sentences

The excess purchase price over par value was allocated between additional paid-in capital and retained earnings.

As of March 29, 2024, authorized repurchases of $ 250,000 remain available to the Company.

As of June 28, 2024, authorized repurchases of $ 250,000 remain available to the Company.

FOX FACTORY HOLDING CORP.

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Equity Incentive Plans

The following table summarizes the allocation of stock-based compensation in the accompanying condensed consolidated statements of (loss) income:

For the three months ended

March 29, 2024 March 31, 2023

The following table summarizes the allocation of stock-based compensation in the accompanying condensed consolidated statements of income:

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Cost of sales $ 320 $ 331 $ 556 $ 573

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Total $ 2,203 $ 4,483 $ 6,108 $ 10,184

The following table summarizes the activity for the Company’s unvested restricted stock units (“RSUs”) for the three months ended March 29, 2024:

The Company grants both time-based and performance-based stock awards, which also include a time-based vesting feature.

Compensation expense for time-based stock awards is measured at the grant date based on the closing market price of the Company’s common stock and recognized ratably over the vesting period.

For performance-based stock awards, compensation expense is measured based on estimates of the number of shares ultimately expected to vest at each reporting date based on management’s expectations regarding the relevant performance criteria.

The recognition of compensation expense associated with performance-based stock awards requires defined criteria for assessing achievement and judgment in assessing the probability of meeting the performance goals.

The following table summarizes the activity for the Company’s unvested restricted stock units (“RSUs”) for the six months ended June 28, 2024:

Unvested RSUs

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Vested ( 134 ) $ 94.71

Unvested at March 29, 2024 307 $ 81.15

As of March 29, 2024, the Company had approximately $ 16,612 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.06 years.

During the three months ended March 29, 2024, the Company issued performance-based restricted stock units (“PSUs”) to certain executives that represent shares potentially issuable in the future.

Unvested at June 28, 2024 427 $ 60.49

As of June 28, 2024, the Company had approximately $ 22,860 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.22 years.

During the six months ended June 28, 2024, the Company issued performance-based restricted stock units (“PSUs”) to certain executives that represent shares potentially issuable in the future.

Issuance is based upon the Company’s performance, over a three -year performance period, against an adjusted EBITDA margin target.

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The company also issued PSUs to certain executives and non-executives based upon the Company’s performance, over a four-year performance period, against a trailing 12-month revenue target.

These revenue-growth PSUs vest only upon the achievement of the applicable performance goals for the performance period, and, depending on the actual achievement on the performance goals, the grantee may earn between 0 % and 100% of the target PSUs.

The fair value of PSUs is calculated based on the stock price on the date of grant assuming the performance goals will be achieved.

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(in thousands, except per share data)

The following table summarizes the activity for the Company’s unvested PSUs for the three months ended March 29, 2024:

The following table summarizes the activity for the Company’s unvested PSUs for the six months ended June 28, 2024:

Unvested PSUs

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Granted 225 $ 46.78

Unvested at March 29, 2024 290 $ 63.63

Canceled ( 2 ) $ 46.81

Unvested at June 28, 2024 293 $ 63.50

The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of certain performance conditions.

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The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 3.14 years.

Net (Loss) Earnings Per Share

Basic net (loss) earnings per share amounts are computed by dividing net (loss) income for the period by the weighted average number of common shares outstanding during the period.

Diluted net (loss) earnings per share amounts are computed by dividing net (loss) income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

Potentially dilutive common shares include shares issuable upon the exercise of outstanding stock options and vesting of restricted stock units, which are reflected in diluted earnings per share by application of the treasury stock method.

For purpose of the diluted net loss per share calculation, the potential dilutive common shares are excluded because their effect would be antidilutive;

therefore, basic and diluted net loss per share were the same for the three months ended March 29, 2024.

The Company excluded 139 and 1 shares from the calculation of diluted net (loss) earnings per share for the three months ended March 29, 2024 and March 31, 2023, respectively, as these shares would have been antidilutive.

The following table presents the calculation of basic and diluted (loss) earnings per share:

For the three months ended

March 29, 2024 March 31, 2023

Net (loss) income $ ( 3,496 ) $ 41,767

Earnings Per Share

Basic earnings per share amounts are computed by dividing net income for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings per share amounts are computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

Potentially dilutive common shares include shares issuable upon the exercise of outstanding stock options and vesting of RSUs and PSUs, which are reflected in diluted earnings per share by application of the treasury stock method.

The Company excluded 145 and 103 shares from the calculation of diluted earnings per share for the three and six months ended June 28, 2024, and 17 and 5 for the three and six months ended June 30, 2023, respectively, as these shares would have been antidilutive.

The following table presents the calculation of basic and diluted earnings per share:

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Net income $ 5,407 $ 39,735 $ 1,911 $ 81,502

Weighted average shares used to compute basic earnings per share 41,673 42,359 41,662 42,329

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Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

For the three months ended

March 29, 2024 March 31, 2023

(in thousands)

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

(Benefit) provision for income taxes $ ( 371 ) $ 8,095 $ ( 1,638 ) $ 17,473

Effective tax rates ( 7.4 ) % 16.9 % ( 620.1 ) % 17.7 %

For the three months ended March 29, 2024, the difference between the Company’s effective tax rate of 26.6 % and the 21 % federal statutory rate was due to the impact of discrete items and pre-tax loss.

For the three months ended March 31, 2023, the difference between the Company’s effective tax rate of 18.3 % and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, partially offset by state and foreign withholding taxes.

For the three months ended June 28, 2024, the difference between the Company’s effective tax rate of ( 7.4 )% and the 21 % federal statutory rate resulted primarily due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

For the six months ended June 28, 2024, the difference between the Company’s effective tax rate of ( 620.1 )% and the 21 % federal statutory rate was due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

For the three months ended June 30, 2023, the difference between the Company’s effective tax rate of 16.9 % and the 21 % federal statutory rate was due to a lower tax rate on foreign derived intangible income and excess benefit related to stock-based compensation.

This benefit was partially offset by state and foreign withholding taxes.

For the six months ended June 30, 2023, the difference between the Company’s effective tax rate of 17.7 % and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income.

This benefit was partially offset by state and local foreign withholding taxes.

We do not expect the results from any ongoing income tax audits to have a material impact on our consolidated financial condition, results of operations, or cash flows.

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The buildings are owned by the former owner of Custom Wheel House, who is now an employee of the Company.

Rent expense under these leases was $ 185 for the three months ended March 29, 2024.

Rent expenses under these leases were $ 186 and $ 371 for the three and six months ended June 28, 2024, and $ 180 for the three and six months ended June 30, 2023.

Acquisition of Marucci Sports LLC

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The purchase price of Marucci was preliminarily allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of November 14, 2023 with the excess purchase price allocated to goodwill.

During the three months ended March 29, 2024, the Company updated the purchase price allocation and recorded adjustments to net assets of $ 892 and goodwill of $ 850 .

During the six months ended June 28, 2024, the Company updated the purchase price allocation and recorded adjustments to net assets of $ 892 and goodwill of $ 850 .

The following table summarizes the provisional fair values of the identifiable assets acquired and liabilities assumed at the date of the acquisition:

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Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Acquisition consideration

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The Company’s valuation is preliminary and subject to the Company’s validation of deferred taxes.

The Company incurred $ 3,636 of acquisition costs in conjunction with the Marucci acquisition, $ 510 of which incurred during the three months ended March 29, 2024.

These costs are classified as general and administrative expenses in the accompanying consolidated statements of (loss) income.

The Company incurred $ 3,798 of acquisition costs in conjunction with the Marucci acquisition, of which $ 162 and $ 672 incurred during the three and six month ended June 28, 2024, respectively.

These costs are classified as general and administrative expenses in the accompanying consolidated statements of income.

Additional debt issuance costs of $ 6,709 were incurred in association with financing the transaction and are amortized over the term of the Incremental Term Loan A.

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Marucci previously purchased intangibles in asset acquisitions with a remaining net tax basis approximating $ 57,735 , which the Company may deduct for income tax purposes.

The results of operations for Marucci have been included in the Company's consolidated statements of (loss) income since the closing date of the acquisition on November 14, 2023.

The total revenue and pre-tax income for Marucci for the three months ended March 29, 2024 amounted to $ 59,588 and $ 4,365 , respectively.

The results of operations for Marucci have been included in the Company's consolidated statements of income since the closing date of the acquisition on November 14, 2023.

The total revenue for Marucci for the three and six months ended June 28, 2024 amounted to $ 41,628 and $ 101,217 respectively.

The total pre-tax income for Marucci for the three and six months ended June 28, 2024 amounted to $ 2,507 and $ 6,872 respectively.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

Segment Information

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Powered Vehicles Group:

This segment operates 2 plants in the United States of America.

This segment operates 2 plants in the United States.

Our premium products sold under the FOX brand for off-road vehicles and trucks, side-by-sides, on-road vehicles with and without off-road capabilities, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

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Aftermarket Applications Group:

This segment operates 15 plants across the United States of America.

This segment operates 15 plants across the United States.

Our range of aftermarket applications products includes premium products under the BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, Outside Van, SCA, and Custom Wheel House brands designed for off-road vehicles and trucks, side-by-sides, on-road vehicles with or without off-road capabilities, specialty vehicles and applications, and commercial trucks.

Specialty Sports Group:

This segment operates 9 plants and 13 distribution facilities (11 in the United States of America, 4 in Taiwan, and one facility each in Australia, Canada, Germany, Japan, Sweden, Switzerland, and United Kingdom).

This segment operates 9 plants and 13 distribution facilities (11 in the United States, 4 in Taiwan, and one facility each in Australia, Canada, Germany, Japan, Sweden, Switzerland, and United Kingdom).

Our bike product offerings are used on a wide range of performance mountain bikes, e-bikes and gravel bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.

These products are sold through both OEM and aftermarket channels.

Our products for diamond sports include premium baseball and soft ball equipment under the Marucci, Victus, Lizard Skins, and Baum Bat brands and are sold through dealers and distributors and through direct-to-customer channels.

Our products for diamond sports include premium baseball and softball equipment under the Marucci, Victus, Lizard Skins, and Baum Bat brands and are sold through dealers and distributors and through direct-to-customer channels.

Net sales and expenses are measured in accordance with the policies and procedures described in Note 1 – Business and Summary of Significant Accounting Policies within our 2023 Form 10-K.

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Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

(in thousands)

The tables that follow show selected segment financial information including information for prior comparative period.

Unallocated corporate expenses are corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated occupancy costs for our corporate headquarters, acquisition costs, other benefit and compensation programs, including performance-based compensation, and administrative expenses such as accounting, finance, legal, human resources, and information technology expenses.

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Power Vehicles Group $ 117,795 $ 140,196 $ 235,908 $ 282,443

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Net sales $ 348,491 $ 400,715 $ 681,963 $ 800,566

Net (loss) income ( 3,496 ) 41,767

Net income 5,407 39,735 1,911 81,502

(Benefit) provision for income taxes ( 371 ) 8,095 ( 1,638 ) 17,473

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(1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Company’s operations and the impact of the finished goods inventory valuation adjustment recorded in connection with the purchase of acquired assets, per period as follows:

For the three months ended

March 29, 2024 March 31, 2023

For the three months ended For the six months ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Acquisition related costs and expenses $ 470 $ 300 $ 1,148 $ 1,704

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements